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Brown & Brown (BRO) Q2 Earnings Miss Estimates, Improve Y/Y
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Brown & Brown, Inc. (BRO - Free Report) reported second-quarter 2018 earnings of 26 cents per share, missing the Zacks Consensus Estimate by 3.7%. However, the bottom line improved 8.3% year over year.
Brown & Brown, Inc. Price, Consensus and EPS Surprise
The quarter witnessed strong organic revenue growth along with increase in commissions and fees. The insurance broker’s business continued to show prowess and inorganic growth remained strong with new buyouts. Though expenses increased, the bottom line benefited from low tax incidence.
Behind the Headlines
Total revenues amounted to $473.1 million, edging past the Zacks Consensus by 0.7%. Moreover, the top line inched up about 1.5% year over year, riding on higher Commissions and fees plus net investment income. Organic revenue growth was 5.2% in the reported quarter.
Commissions and fees grew 1.6% year over year to $472 million.
Investment income surged 75% year over year to $0.7 million.
Total expenses increased nearly 3.9% to $372.2 million, driven by a rise in employee compensation and benefits, other operating expenses as well as interest expenses.
Net income before interest, income taxes, depreciation, amortization and a change in estimated acquisition earn-out payables (EBITDAC) margin contracted 320 basis points to 29.1%.
Financial Update
Brown & Brown exited the second quarter with cash and cash equivalents of $477.9 million, down 16.7% from the 2017-end level.
Long-term debt of $847 million as of Jun 30, 2018 was down 1.1% from the level at 2017 end.
Net cash provided by operating activities for six months ending Jun 30, 2018, came in at $274 million, up 1.4% from the same period in 2017.
Adoption of New Accounting Standard
On Jan 1, 2018, Brown & Brown adopted FASB Accounting Standards Update No. 2014-09, ‘Revenue from Contracts with Customers (Topic 606)’ and Accounting Standards Codification (Topic 340) — Other Assets and Deferred Cost. This hurt the top line by $27.2 million and the bottom line by 5 cents in the quarter under review.
Dividend Update
The board of directors approved a dividend of 7.50 cents per share, payable Aug 15, 2018 to shareholders of record on Aug 8, 2018.
Among other players from the insurance industry having reported second-quarter earnings so far, the bottom line of The Progressive Corporation (PGR - Free Report) , MGIC Investment Corporation (MTG - Free Report) and RLI Corp. (RLI - Free Report) beat the respective Zacks Consensus Estimate.
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Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Brown & Brown (BRO) Q2 Earnings Miss Estimates, Improve Y/Y
Brown & Brown, Inc. (BRO - Free Report) reported second-quarter 2018 earnings of 26 cents per share, missing the Zacks Consensus Estimate by 3.7%. However, the bottom line improved 8.3% year over year.
Brown & Brown, Inc. Price, Consensus and EPS Surprise
Brown & Brown, Inc. Price, Consensus and EPS Surprise | Brown & Brown, Inc. Quote
The quarter witnessed strong organic revenue growth along with increase in commissions and fees. The insurance broker’s business continued to show prowess and inorganic growth remained strong with new buyouts. Though expenses increased, the bottom line benefited from low tax incidence.
Behind the Headlines
Total revenues amounted to $473.1 million, edging past the Zacks Consensus by 0.7%. Moreover, the top line inched up about 1.5% year over year, riding on higher Commissions and fees plus net investment income. Organic revenue growth was 5.2% in the reported quarter.
Commissions and fees grew 1.6% year over year to $472 million.
Investment income surged 75% year over year to $0.7 million.
Total expenses increased nearly 3.9% to $372.2 million, driven by a rise in employee compensation and benefits, other operating expenses as well as interest expenses.
Net income before interest, income taxes, depreciation, amortization and a change in estimated acquisition earn-out payables (EBITDAC) margin contracted 320 basis points to 29.1%.
Financial Update
Brown & Brown exited the second quarter with cash and cash equivalents of $477.9 million, down 16.7% from the 2017-end level.
Long-term debt of $847 million as of Jun 30, 2018 was down 1.1% from the level at 2017 end.
Net cash provided by operating activities for six months ending Jun 30, 2018, came in at $274 million, up 1.4% from the same period in 2017.
Adoption of New Accounting Standard
On Jan 1, 2018, Brown & Brown adopted FASB Accounting Standards Update No. 2014-09, ‘Revenue from Contracts with Customers (Topic 606)’ and Accounting Standards Codification (Topic 340) — Other Assets and Deferred Cost. This hurt the top line by $27.2 million and the bottom line by 5 cents in the quarter under review.
Dividend Update
The board of directors approved a dividend of 7.50 cents per share, payable Aug 15, 2018 to shareholders of record on Aug 8, 2018.
Zacks Rank
Brown & Brown holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Insurers
Among other players from the insurance industry having reported second-quarter earnings so far, the bottom line of The Progressive Corporation (PGR - Free Report) , MGIC Investment Corporation (MTG - Free Report) and RLI Corp. (RLI - Free Report) beat the respective Zacks Consensus Estimate.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>